Representatives including Singapore Prime Minister Lee Hsien Loong (second left) and Malaysian Prime Minister Najib Razak (second right) at the signing of the memorandum of understanding over the link in July. Photo: EPA

AS MALAYSIA AND Singapore prepare to ink their agreement on a high-speed rail link between Kuala Lumpur and the city state, Japan has signalled its keenness on one of its engineering companies securing the contract, and voiced hope that the process – in which Chinese companies will also compete – will be transparent and “based on international standards.”

Malaysian and Singaporean officials will seal the bilateral deal on December 13. The tracks will run for 350km – 335km in Malaysia and 15km in Singapore – with stops at six other cities along the way.

Its builders, whichever country they come from, will work from 2018 to 2025, before launching commercial services in 2026. The project is expected to cost between 50 billion and 60 billion ringgit (HK$105 billion) – yet some critics have questioned whether the link is even necessary.

Japan is competing closely with China for the contract, with China seen as the front runner after a slew of successful infrastructure bids in Malaysia, including the East Coast Rail Link, a 620km line costing RM55 billion, which it won last October.

An official from the Japanese embassy in Malaysia said the latest tender was a “good opportunity” for Malaysia and Singapore to prove that both economies were based on “internationally established process and procedures.”

“We hope the tendering process... will be based on international standards, transparent, and good for private companies’ initiatives based on market mechanisms,” he said. The official said Japanese companies would make the best offers, and touted the country’s rail-building credentials. Japan’s own high-speed rail, the Shinkansen, has had no fatal collision or derailment in its 51-year history.

“The Shinkansen has been accepted by India, Thailand and Taiwan. In a way, it is becoming the railway standard in Asia,” he said.

Ong Kian Ming, a Malaysian MP from the opposition Democratic Action Party said he believed the bidding process would be competitive, but suggested China could have an edge.“The terms and conditions of the contract are still secret, as far as I know,” he said.

“But I have been made to understand that the bidding process will be competitive, especially given the international interest from Chinese, Japanese and South Korean companies.”

“Transparency, in terms of information disclosed to the public and to lawmakers, is still sadly lacking. If it was only up to the Malaysian government, I would say that China is in the prime position to win this bid especially given that China Engineering bought a strategic stake in Bandar Malaysia [an urban development project in the capital] which is the main station in Malaysia for the high-speed rail.

“But given the involvement of the Singapore government, and perhaps concerns about the safety record of some Chinese rail companies, my sense is that Japanese companies are likely to be given serious consideration as well.”

China’s state-owned China Railway Engineering Corp teamed up with Malaysian Iskandar Waterfront Holdings to buy a 60 per cent stake in Bandar Malaysia from state-owned, debt-riddled investment firm 1MDB for US$1.7 billion. Bandar Malaysia is the second asset China has bought from 1MDB; the first being its power asset, Edra Global Energy Berhad, effectively paring down its debts and throwing a lifeline to Prime Minister Najib Razak whom some analysts view as being beholden to China now.

Tender documents for the high-speed line’s systems package – the rail track and train carriages – will be issued at the end of next year, said Mohd Nur Ismal Mohamed Kamal, chief executive of MyHSR, the agency in charge of the Malaysian share of the project.

“After the tender is open in the final quarter of 2017, bidders will be given a year to submit. Then the two countries will do the evaluation,” Mohd Nur was quoted as saying by the Singapore press on Friday.

But Ong expressed concerns over the project’s huge cost. “We are concerned that this will be another off-budget, big-ticket infrastructure expenditure item that will have significant consequences on government finances in the future, especially if the high-speed rail line proves to be unprofitable,” he said.

“The question should be, does the Kuala Lumpur-Singapore route need to be served by a high-speed rail link. We have over a hundred flights a week from KL to Singapore via low-cost carriers as well as full-fare carriers. We have thousands of buses plying the Singapore-KL bus route.”

Given its high cost, the line is unlikely to be commercially viable without substantial financial support in the form of concessionary financing or partial absorption of capital costs by the two governments, and the selected source country, said Yeah Kim Leng, professor of economics at Sunway University Business School, in Malaysia.

But economists have welcomed the rail project, saying it will quicken development, especially in the townships along the line.

“The emergence of megacities will be facilitated by this high-speed rail development connectivity,” Yeah said. “This is also important for Singapore, as it has become a service centre, so any improvement or enhancement in connectivity – either by air or rail – will actually boost their economic standing because they are a trading hub.”

He said the new track would also attract international tourists, as a high-speed train is seen as an attractive mode of transport.

“It will also provide some healthy competition, driving down the costs of travel by air and rail,” he said.

He added that Thailand was interested in developing a high-speed link between Bangkok and Kuala Lumpur.

“If that comes through then the spillover will be much greater. It will enhance regional connectivity, in line with China’s development of ‘One Belt, One Road’ investments,” he said.

“It is going to herald the era of high-speed rail in the Southeast Asia region.” ■